Indonesia suspects local Google branch of tricking the taxman

Indonesia’s tax office said it will investigate Alphabet Inc, the parent company of Internet giant Google, for suspected unpaid taxes of at least $400 million from advertising revenue it made in Indonesia in 2015 alone, Muhammad Haniv, head of the specials cases branch in the Indonesian federal tax office, said.

The tax office alleges that Google in Indonesia paid less than 0.1 per cent of the total income and value-added taxes it owed last year.

If found guilty, Google may have to pay fines of up to four times the amount it owed, bringing the maximum tax bill to 5.5 trillion rupiah ($418 million) for 2015, Haniv said.

He added that Google refused to cooperate after it was sent a letter in April requesting to be allowed to examine the company’s tax reports. The probe would be launched at the end of the month at the earliest, he noted, and could result in a a criminal case.

PT Google Indonesia, incorporated in 2011, said it was complying with the government.

“We continue to cooperate fully with local authorities and pay all applicable taxes,” a Google Indonesia spokesman said.

However, according to Haniv, Google Indonesia was allocated far too low taxes from the generated revenues. He believes that this tax rate was unfair and too small for such a big company, arguing that the digital advertising industry in Indonesia was worth around $800 million in 2015 and remains largely untaxed, according to the country’s communication ministry.

Most of Google’s revenue generated in Indonesia is booked at Google’s Asia-Pacific headquarters in Singapore where the corporate tax rate is 17 per cent compared with 25 per cent in Indonesia.

He also believes that there was no explanation for the huge discrepancy between the estimates of the finance ministry and Google for the digital advertising revenues.

The Indonesian government had also asked to examine the tax reports of the Indonesian offices of three other US Internet based companies, Yahoo , Twitter and Facebook.

Indonesia’s tax office said it will investigate Alphabet Inc, the parent company of Internet giant Google, for suspected unpaid taxes of at least $400 million from advertising revenue it made in Indonesia in 2015 alone, Muhammad Haniv, head of the specials cases branch in the Indonesian federal tax office, said.

The tax office alleges that Google in Indonesia paid less than 0.1 per cent of the total income and value-added taxes it owed last year.

If found guilty, Google may have to pay fines of up to four times the amount it owed, bringing the maximum tax bill to 5.5 trillion rupiah ($418 million) for 2015, Haniv said.

He added that Google refused to cooperate after it was sent a letter in April requesting to be allowed to examine the company’s tax reports. The probe would be launched at the end of the month at the earliest, he noted, and could result in a a criminal case.

PT Google Indonesia, incorporated in 2011, said it was complying with the government.

“We continue to cooperate fully with local authorities and pay all applicable taxes,” a Google Indonesia spokesman said.

However, according to Haniv, Google Indonesia was allocated far too low taxes from the generated revenues. He believes that this tax rate was unfair and too small for such a big company, arguing that the digital advertising industry in Indonesia was worth around $800 million in 2015 and remains largely untaxed, according to the country’s communication ministry.

Most of Google’s revenue generated in Indonesia is booked at Google’s Asia-Pacific headquarters in Singapore where the corporate tax rate is 17 per cent compared with 25 per cent in Indonesia.

He also believes that there was no explanation for the huge discrepancy between the estimates of the finance ministry and Google for the digital advertising revenues.

The Indonesian government had also asked to examine the tax reports of the Indonesian offices of three other US Internet based companies, Yahoo , Twitter and Facebook.